Retail, mall scene still on a high
The Philippines is deviating from a global trend.
While many retail stores elsewhere in the world are being shuttered, primarily rendered obsolete by the consumers’ growing preference for online shopping, the Philippine retail and mall scene remains robust and well poised for sustained growth.
It even continues to attract global retail giants to set up shop in the country.
Clearly, malls remain an important part of the Filipino lifestyle and continue to attract consumer traffic, deviating from the trend seen in the United States for instance, where hundreds of brick and mortar stores are being closed.
But there are a number of factors contributing to the continued popularity of shopping malls in the country.
Primarily, there remained a marginal number of Filipinos preferring or have access to online shopping. Despite the growing acceptance of online shopping in the country, only 3.5 percent of Filipino adults make purchases online, said Colliers International Philippines, citing data from the World Bank Global Financial Index.
Only 2.2 percent use a credit card to make payments; while a mere 4.2 percent have mobile accounts, it added.
On the retailer side, it has also become more attractive to set up shop in the Philippines.
Given a robust local economy and a growing middle class, more Filipinos have stronger purchasing power than five or 10 years ago. And if the first package of the proposed tax reform program will be passed into law, Filipinos’ per capita incomes and purchasing power are expected to increase anew given the expected reduction of income tax rates.
Colliers further pointed out that the government had said it would reduce the minimum paid up capital required for foreign retailers to open shop in the country to only $200,000 from the current $2.5 million.
This will take effect once the government releases the next Foreign Investment Negative List (FINL) by the end of the year. The FINL specifies the investment areas that are restricted to foreigners.
The government’s move should enable the entry of more foreign retailers especially those into food and beverage industry and home furnishing, as these are the two segments still dominated by local players, Colliers said.
Colliers added that the Board of Investments has also earlier approved the application of global home furnishing giant IKEA to enter the Philippine market. The firm will be competing against foreign retailers already present here such as Pottery Barn, West Elm, Crate and Barrel, and H & M Home as well as homegrown brands such as SM’s Our Home and Vista Mall’s AllHome.
This is why in the Philippines, online shopping and social media platforms are rather being used by many developers and retailers to complement their physical stores. Here are a few thoughts from Colliers as to how mall operators and retailers maximize the benefits of e-commerce:
Operators and retailers should ramp up the security features of their online sites. If they do so, customers wary of hacking will be encouraged to use their credit cards, debit cards, and mobile wallets more frequently for online transactions.
Operators trying to develop their online shops should consider giving priority to clothing and accessories as these are the most visited categories, according to a Mastercard Online Shopping Survey.
Online supermarkets, which cater to working mothers and highly mobile millennial consumers, are the second-most visited segments. We expect online shopping to thrive over the near to medium term given the private telecommunications firms’ efforts to improve internet connectivity in the country and the government’s rolling out of free internet in public places.
Physical and online stores can also complement each other during holiday sales. The typically heavy traffic within Metro Manila is exacerbated by the holiday shopping rush, prompting some consumers to stay at home and purchase items online. Brick-and-mortar malls can maximize their partnership with e-commerce sites by offering their discounted items online.
With adequate online shopping and logistics services, mall operators can empower Filipinos working in Metro Manila and overseas to shop online and have their family members pick up their groceries in physical stores nearest to them.
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